8 Ways to Lower Your RMDs and Keep More of What You Saved

Why Are RMDs Such a Big Deal?

In your 70s, the IRS starts forcing you to withdraw from your 401(k) or IRA whether you need the money or not. Poor planning will likely shove you into a higher tax bracket, reduce what’s left for your heirs, or trigger a retiree’s worst fear: running out of money.

Below are 8 strategies retirees use to lower their Required Minimum Distributions (RMDs). Toward the end, we’ll walk through the math on why the popular strategies often barely make a dent, and the framework we actually recommend when the goal is a meaningful reduction.

What Are the RMD Rules?

Under SECURE Act 2.0, the government now lets retirees defer withdrawals from their retirement accounts longer than ever before.

The goal is to let your retirement funds grow longer. But that creates a bigger problem: the longer your IRA compounds, the more you’re eventually forced to pull out, and the higher the tax bracket you can get pushed into.

A Quick Example. 

Say you were born in 1965 and have $500,000 in IRAs today. At a 6% average return, that could grow to roughly $1.2 million by age 73. Divide that by the IRS life expectancy factor at that age, and your first RMD would be $48,700, and it will increase in the following years.

If you don’t need the money, you still have to withdraw and pay taxes on the “income”. That extra income may bump you into a higher tax bracket, increase how much of your Social Security is taxed, and raise your Medicare premiums through IRMAA surcharges.

The 8 Strategies to Reduce RMDs

1. Roth Conversions

The biggest reason people do Roth conversions is tax planning. Income often drops right after retirement, but once RMDs and Social Security kick in, taxable income rises again, sometimes significantly. The early retirement window, before RMDs begin, is a powerful time to convert at a lower rate than you might face later.

The caution: this only makes sense if you’re currently in a low tax bracket. If you’re already at 32% or 37%, converting can push you even higher. And if you need the money to live off of, a Roth conversion may not fit either. It’s usually smaller, intentional conversions over time, not $100,000 or $200,000 in one shot.

One detail worth knowing: every Roth conversion resets a 5-year clock before that specific conversion can be withdrawn tax-free.

If you hold an IRA annuity or Hybrid Pension, some carriers allow you to convert that same annuity to a Roth within the same contract, so you don’t lose the years you’ve already deferred toward a higher future payout. Not every carrier offers this, so it’s worth asking directly if you’re in that position.

2. Spend From Other Buckets First

If you have cash savings or a brokerage account, consider spending from those before touching your IRA. This is part of a Staging and Laddering approach: since you’ve already paid tax on that money, you’re only exposed to long-term capital gains rates when you draw it down.

The most you’ll pay is 20% in long-term capital gains. Many people don’t realize there’s also a 0% bracket, and none of this affects your ordinary income. Spending from other buckets first also buys you time, more room to delay IRA withdrawals and do larger Roth conversions before RMDs begin. (See how your withdrawal tax bracket works for the full income vs. capital gains breakdown.)

3. Delay Social Security Until Age 70

This doesn’t directly reduce your RMDs, but it keeps your tax-planning window open. If you claim Social Security at 62 or 65, that’s immediate taxable income stacked on top of everything else, making it harder to do Roth conversions without jumping brackets.

Delay to 70 and live off cash or brokerage accounts in the meantime, and your taxable income stays lower for longer, which means more room for conversions. Your monthly benefit also grows the longer you wait, and if you’re married, delaying protects your spouse too, since the survivor keeps the higher benefit for life.

4. Qualified Charitable Distributions (QCDs)

Once you turn 70½, you can give up to $100,000 per year, per spouse, directly from your IRA to a qualified charity. That gift does NOT count as taxable income, but it does count toward your RMD.

The test: if your RMD is $40,000 and you donate $25,000 via QCD, you only need to withdraw $15,000 more to satisfy the requirement.

5. Continue Working

Known as the “still-working exception.” If you’re still employed at 73 or 75 and don’t own 5% or more of the company, you can delay RMDs from your current employer’s 401(k) until you retire. This does NOT apply to old 401(k)s you’ve already rolled into an IRA.

6. Contribute to a Roth 401(k) or After-Tax 401(k)

Roth 401(k)s carry NO RMDs once rolled into a Roth IRA, and after-tax contributions can be rolled into a Roth IRA later, shrinking your pre-tax balance and future RMDs. This works best if you’re not currently in a high tax bracket. If you’re paying 32% or 37% now, it may be smarter to take the deduction today and convert later.

7. Qualified Longevity Annuity Contracts (QLACs)

A QLAC lets you defer a portion of your IRA RMDs until age 85, excluding that money from your current RMD calculation. 

The catch: a QLAC is a Deferred Income Annuity (DIA), meaning your money is annuitized.

Meaning: you give up ownership of the principal and can’t cash out if you change your mind.

We’re generally not fans of this one. A Hybrid Pension can offer more control, keeps the tax deferral, and in many cases delivers a stronger payout than a QLAC, without permanently locking up your principal.

8. Lifestyle Spending Through a Hybrid Pension

This is the strategy we lead with for most clients. The number one fear retirees face is running out of money, and that fear alone holds people back from actually enjoying retirement. A Hybrid Pension provides guaranteed income for life, which gives you the confidence to spend more in your active early retirement years.

Here’s the mechanism: as you spend down your IRA balance through guaranteed income, you’re naturally shrinking the account that future RMDs are calculated from. It’s similar in spirit to a Roth conversion, you pay some tax now instead of a larger amount later, except here you’re also living the retirement you saved for.

A quick check on the tax math: Say you planned around the 12% tax bracket, but withdrew an extra $50,000 and landed in the 22% bracket. Only the amount above the 12% threshold gets taxed at 22%, so that’s roughly $5,000 in additional tax, not $11,000. Even jumping from 24% to 32% on an extra $80,000 withdrawal results in about $8,000 more in taxes, not the shock most people assume.

Why the Popular Strategies Often Barely Move the Needle

All of the strategies above help reduce your future RMDs. The problem is, most people try to use them too late, or they aren’t willing to do enough to make a meaningful difference.

In-Depth Example:

Say you’re 60 today with $2 million in your IRA, earning an average 8% annual return, and your RMDs don’t start until 75. Left completely untouched, that $2 million compounds to roughly $6.34 million by 75. Your first RMD would be approximately $258,000, forced out in a single year, taxed entirely as ordinary income.

That RMD doesn’t just raise your tax bill. It can push you into a much higher Medicare IRMAA bracket, meaning higher Part B and D premiums on top of the extra tax.

So people reach for the standard playbook: Roth conversions, spending down the IRA. Here’s what those actually look like in practice.

Roth conversions, done the typical way. Most advice says wait until you’re in a lower bracket, which usually means waiting until retirement. But every year you wait is another year your IRA compounds. Retire at 67 instead of converting from 60, and your 15-year window shrinks to 8. And most people only convert small amounts out of fear of the next bracket, the average conversion is around $50,000 a year. Convert $50,000 a year for 10 years, that’s $500,000 converted, but the IRA still grows to over $5.2 million on the remainder. Your RMD at 75: still about $208,000, versus $258,000 doing nothing.

Spending down, done the typical way. Retire at 60 and follow the 4% rule, withdrawing $80,000 a year. Fifteen years later, the IRA has still grown to about $5.2 million, because the withdrawals didn’t outpace growth. Run the RMD formula and you land around $211,000, barely different from doing nothing at all.

It’s like swinging a small hammer on the sidewalk. You can swing all day and maybe even crack the cement, but the crack will be too small to matter. The strategies aren’t broken, they just can’t work fast enough in the window most people give them.

The Framework That Meaningfully Reduces RMDs

So the real question isn’t which strategy to pick. It’s how to make a big enough impact, fast enough, that it’s actually worth doing.

In-Depth Example Continued:

Going back to the same 60-year-old with a $2 million IRA, now add $500,000 in a brokerage account to help cover conversion taxes, for a total portfolio of $2.5 million. (If your numbers are smaller, the math scales down. If they’re larger, the same logic applies to a bigger problem.)

Step one: split the IRA. Instead of leaving the full $2 million in one bucket, keep $500,000 growing in the market. By 75, that grows to roughly $1.586 million, producing an RMD of about $64,000, a fraction of the $258,000 you’d face doing nothing.

Step two: convert the rest through a laddered Hybrid Pension. The remaining $1.5 million moves into an IRA Hybrid Pension, split into multiple ladders, converting roughly $100,000 a year into a Roth Hybrid Pension over about 10 years. Each ladder keeps its own contractual payout, and rather than turning income on immediately, it grows tax-free.

A Hybrid Pension used for this strategy isn’t the same as a Hybrid Pension paying 6% to 8%. To make a meaningful dent, the payout needs to be structured higher, guaranteed income rates in this kind of laddered strategy commonly fall in the 10% to 20% range, and the exact rate depends on your age, deferral period, and carrier. (Our full breakdown of how these payout rates work goes deeper on the mechanics.) These aren’t variable annuities with hidden fees, and they aren’t irrevocable, you keep control of your principal.

What about the conversion tax bill? In a worst-case scenario, converting the full $1.5 million could trigger roughly $450,000 in federal and state tax. That’s the number that scares most people away from large conversions. But paying that tax bill from a brokerage account, rather than from the IRA itself, means it’s taxed under long-term capital gains rates, just three brackets: 0%, 15%, and 20%, and none of it raises your ordinary income.

Divide that illustrative $450,000 tax hit by an illustrative $300,000 a year in guaranteed, tax-free income from the Hybrid Pension (based on a payout rate toward the higher end of the 10% to 20% range), and the tax bill is recovered in under two years. Even at a more conservative payout, most versions of this math land in the two-to-four-year range. And that’s before counting the tax-free income that continues for the rest of your life, the Medicare IRMAA surcharges avoided, or the reduced taxation on Social Security.

If converting isn’t the right fit, the same split works without it. Keep $500,000 in the market, move $1.5 million into a Hybrid Pension without converting, and defer 5 years before turning income on at 65. At an illustrative 10%+ payout, that’s roughly $172,000 a year for life. Because the cash value continues growing alongside the income, the account doesn’t drain the way you’d expect, in this example, it’s still worth roughly $1.3 million at 75, on top of the income already collected. Combined with the $500,000 left in the market, the total RMD at 75 comes in around $118,000, still cutting the original $258,000 by more than half.

For a different structure that also addresses RMDs through account sequencing, see our Accelerated RMD 5-Bucket Strategy.

Who Shouldn’t Worry About This?

Anyone who wants to truly live and enjoy their retirement, not just minimize a tax bill. You can’t take the money with you, and the years spent overly frugal with taxes are years you don’t get back.

Consider retirees with a generous pension instead of a large IRA. They’re not going on YouTube  to research optimizing RMD strategies, they simply pay ordinary income tax on their pension. Minimizing RMDs can be smart, but don’t let tax optimization rob you of what you actually saved for: living, giving, and enjoying your retirement years.

And here’s the part people miss: as you spend down your IRA through guaranteed income, you’re naturally reducing your future RMDs anyway, without ever needing to convert a dollar.

Frequently Asked Questions

Ready to Build a Strategy That Actually Moves the Needle?

Most RMD strategies help a little. Few help enough to matter on a large IRA balance. If you want to see what a split-and-convert strategy, or a Hybrid Pension income strategy, could look like with your actual numbers, we can walk you through it.

We represent over 50 plans across all 50 states, and because we’re paid directly by the insurance carriers, the consultation costs you nothing.

Schedule a free, no-pressure consultation with our licensed advisory team at KCIIS today.